Scribd
Upload
8 views2 pages

Home Assignment 4 v1

need to solve tasks

Uploaded by

mr.furqatjon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
8 views2 pages

Home Assignment 4 v1

need to solve tasks

Uploaded by

mr.furqatjon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

Mathematics for Economics and Finance, 2023/2024 Home Assignment #4 (due October 15th, 2023)

Problem 1. Find the functions (c∗ , x∗ , λ∗ ) that satisfy the first-order and transversality conditions of the
following problem,
Z 2
4 − 2x(t) − 6x′ (t) − x′ (t)2 dt
 
max
c,x 0

s.t. ẋ(t) = c(t),


x(0) = 0,

for each of the following different terminal conditions [8 point each],

(a) x(2) is free

(b) x(2) ≥ 4

(c) x(2) = 2000

Verify that the value for the objective function obtained in case (a) is no lower than the one obtain in case
(c) [3 points]; would the opposite make any sense? [3 point]

Problem 2. Find the functions (c∗ , y ∗ , λ∗ ) that satisfy the first-order and transversality conditions of the
following problem,
Z 2
1
max (4(−c(t)) 2 + y(t))dt
c,y 0

s.t. ẏ(t) = c(t),


y(0) = 1,

for each of the following different terminal conditions [6 points each],

(a) y(2) ≥ 0

(b) y(2) ≥ −1

(c) y(2) ≥ −α, for a constant α ∈ (0, ∞)

Given the above [6 points each],

(d) Is the expression for λ∗ (2) found on (c) decreasing or increasing on α?

(e) Explain briefly if you find any economic interpretation to your answer in (d)

Problem 3. Suppose that a smooth function f (t, c) is such that the following optimal control problem has
some solution (notice that f (t, c) does not depend on x),
Z 1
max u(t, c(t), x(t))dt,
c(t),x(t) 0

where u(t, c(t), x(t)) = f (t, c(t)) + x(t),


s.t. ẋ(t) = −(c(t))2 ,
x(0) = 1

Explain briefly whether and why you agree or disagree with the following statements,
Z 1 Z 1
1 1
(a) + max f (t, c) ≥ max u(t, c(t), x(t))dt ≥ + f (t, 0) dt [8 points]
2 t,c c(t),x(t) 0 2 0
Mathematics for Economics and Finance, 2023/2024 Home Assignment #4 (due October 15th, 2023)

(b) (c∗ , x∗ , λ∗ ) where x∗ (t) = 2(1 + t) − et may be a solution [6 points]

(c) (c∗ , x∗ , λ∗ ) where x∗ (t) = 1 − t2 /2, λ∗ (t) = 2 − t may be a solution [6 points]

(d) (c∗ , x∗ , λ∗ ) where λ∗ (t) = 1 − t may be a solutions [6 points]

(e) (c∗ , x∗ , λ∗ ) where c∗ (t) = t may satisfy the necessary conditions for solutions [6 points]

(f ) Adding terminal condition x(1) ≥ 0 may decrease the optimal overall value [8 points]

You might also like